Illinois taxpayers paying former lawmakers $2.1 million a month from underfunded pension system



Illinois taxpayers pay more than $2.1 million a month to retired part-time state legislators or their surviving spouses from a fund that’s only 16% funded. The individual monthly payouts are as high as $18,000 per month. Some pensioners aren’t actually retired but still getting paid.

There are 425 people drawing off the General Assembly Retirement System, ranging from $122 a month to $18,000.

At 16% funded, state Rep. Mark Batinick, R-Plainfield, said GARS is the worst of the state’s five public sector pension funds.

Author(s): Greg Bishop

Publication Date: 14 February 2021

Publication Site: The Center Square

Multiemployer Pensions Reach Highest Funding Levels in 13 Years



Robust investment returns helped boost the aggregate funded percentage of all US multiemployer pension plans to 88% at the end of 2020, from 85% a year earlier—the highest since before the global financial crisis at the end of 2007—according to consulting and actuarial firm Milliman.  

The strong performance came despite a turbulent year of market volatility due to the impact of the COVID-19 pandemic. The volatility caused those same plans’ funded ratio to plunge to 72% during the first quarter of the year, which was the largest quarterly drop in funded percentage since 2007. That was followed by a rebound to 82% in the second quarter, which was the largest quarterly increase in funded percentage since 2007.

Author(s): Michael Katz

Publication Date: 22 February 2021

Publication Site: ai-CIO

Working Paper — State and Local Pensions: The Case for Fundamental Reforms




This Report addresses the widespread underfunding of the retirement systems in the nation’s state and local governments. It begins by summarizing some past, current, and probable future trends of unfunded pension liability at the state and local levels. It describes the scope of unfunded pension debt in various state and local jurisdictions and calculates both their aggregate debt and per capita debt, based on states’ self-assessments; it then incorporates a variety of other measurements of unfunded liability. Results from many of those other measures suggest that the magnitude of unfunded pension liability may be considerably larger than previously indicated.

This Report then describes and analyzes the inherent dynamics of government retirement systems that have produced this underfunding, finding that there are a variety of pressures and processes within these retirement systems that can operate to the disadvantage of employees, beneficiaries, and the public generally. It then summarizes attempts to reform pension systems in several states. Some of those states now have relatively sound retirement systems; others less so. It then contrasts the requirements that govern most private-sector pensions to the relatively relaxed regulatory regimes of state and local government pensions, concluding that adoption of rules similar to those governing private sector requirements would likely have positive consequences if implemented for state and local government pension plans and their beneficiaries.

The nation’s experience with unfunded pension liability at the state and local government levels may provide some lessons for policymakers; this Report concludes with several recommendations in this area.

Author(s): Daniel Greenberg: Senior Policy Advisor in the Veterans’ Employment and Training Service; Jay Sirot: Special Assistant in the Office of the Assistant Secretary for Policy

Publication Date: 15 January 2021

Publication Site: Benefits Link

US Corporate Pension Funded Ratio Climbs to 89.8% in January



The funded ratio of the 100 largest corporate defined benefit (DB) pension plans improved to 89.8% at the end of January from 88.1% at the end of December as their aggregate deficit fell below $200 billion for the first time in more than a year, according to consulting firm Milliman.

With the help of a 16 basis point (bp) increase in the monthly discount rate to 2.62% from 2.46%, the plans’ funding improved by $39 billion in January as their aggregate deficit declined to $196 billion from $235 billion due to liability gains incurred during the month.

Author(s): Michael Katz

Publication Date: 17 February 2021

Publication Site: ai-CIO

Police pension fund has a big 2020



NORTH PROVIDENCE – The town’s police pension fund last year gained more than 10 percent, or $4.7 million, says Mayor Charles Lombardi, a huge year for a fund that was once in tatters.

The Breeze reported back in September 2013 that the town’s injection of $20.6 million from the Police Department’s $60 million winnings in a settlement with Google a year earlier had pushed the fund to more than 95 percent funded.

The state’s 2019 report on locally administered pension plans showed that the fund lost about 8.1 percent on its funded status from 2012 to 2018, to 86.8 percent, and that number was about 88 percent last year, said Lombardi. He said the town’s actuary hasn’t completed its work yet, but he’s hoping that funding status could reach 90 to 92 percent with this latest positive news.

Author(s): Ethan Shorey

Publication Date: 16 February 2021

Publication Site: Valley Breeze

To the union allies of the victor go the pension spoils



Last week, the House Ways and Means Committee approved a massive taxpayer bailout of private sector multiemployer defined benefit pension plans, or MEPs, as part of a budget reconciliation package that is purportedly meant to deal with COVID-19. Senate Budget Committee Chairman Bernie Sanders claims MEPs are underfunded because “of the greed on Wall Street.” But MEPs are troubled because of mismanagement, not because of COVID-19 or Wall Street.

MEPs are jointly sponsored by a union and companies employing members of that union. It is not clear why taxpayers, who had no role in making these pension promises, should be funding them.

The proposal would saddle taxpayers with unfunded pension promises made by eligible MEPs, which are underfunded by more than $100 billion, while providing perverse incentives for other MEPs to subsequently qualify. This would be extremely expensive as MEPs are already underfunded by $673 billion as of 2017 (a funding ratio of 42%).

Author(s): Aharon Friedman

Publication Date: 15 February 2021

Publication Site: Washington Examiner

Commentary: America’s Public Pension System Remains Mired in Crisis


The public pension system lost $1 trillion, a 21 percent loss for the fiscal year, following the COVID-19 lockdowns in March. In turn, these losses have added an overwhelming amount of stress on our public pension systems, as state and local pensions were already facing a $4.1 trillion shortfall. Public pension liabilities are on track to increase to $1.62 trillion this year, up from $1.35 trillion in 2019. These numbers are alarming as many governments now have less capacity to defer cost hikes or take mitigating actions because their non-asset cash flow has greatly declined.

Two of America’s most dire pension plan systems are in California and Illinois, two of the country’s largest states with large numbers of workers in defined contribution plans. In California, the economic effects of the virus are evident on the already strained public pension system. At the end of the first quarter, the California Public Employees’ Retirement System, reported that their asset value had dropped 10.5 percent since June 2019 — a loss of $35 billion. Matters have only gotten worse in Illinois and could soon hit a level of catastrophe if aid does not come forth. Moody’s estimates that Illinois’ pension liability will rise from $230 billion in 2019 to $261 billion in 2020.

Author(s): Kevin O’Connor

Publication Date: 28 January 2021

Publication Site: Institute for Pension Fund Integrity

Vermont Treasurer Calls for Pension Cuts for State Employees, Teachers



Vermont Treasurer Beth Pearce released a report containing recommendations that she said could reduce pension UAAL for the Vermont State Employees’ Retirement System (VSERS) and the Vermont State Teachers’ Retirement System (VSTRS) by $474 million and reduce the actuarial determined employer contribution (ADEC) by $85 million.

“While shy of the total target of $604 million in the UAAL and $96.6 million for the ADEC, it is a significant reduction to the existing liabilities and costs to the taxpayer,” said the report, which added that the net other post-employment liabilities could be reduced by $1.68 billion by directing a “minimal amount” of funds for prefunding. “All in, these recommendations will reduce the state’s post-employment liabilities by $2.2 billion.”

Author(s): Michael Katz

Publication Date: 21 January 2021

Publication Site: ai-CIO

Testimony: Status of the Florida Retirement System


Using publicly available data and annual financial reports published by FRS, our quantitative team has built an actuarial model of the FRS system that has allowed our analysts to spotlight areas of systemic risk and inefficiencies that have resulted in not only the FRS defined benefit plan going from 118 percent funded and a surplus of $13.5 billion to 82 percent funded and holding over $36 billion in earned, yet unfunded, pension obligations that are implicitly protected by law, but also how the defined contribution Investment Plan, as currently built today, falls well short in providing adequate retirement security to public sector employees.

Regarding the current state of the FRS pension plan, underperforming investment returns have been the largest contributor to the unfunded liability, adding $17 billion in debt since 2008. Milliman Inc.—the actuaries hired by the system—warned for three straight years (2016, 2017, and 2018) that the system’s assumed rate of return was not reasonable, leading to its eventual reduction to 7.0 percent. Even with the reduced assumption, however, our analysis indicates that FRS still has a less than 40 percent probability of achieving or exceeding that rate over the next ten years. Market outcomes below FRS expectations will still likely be an issue generating unexpected costs for taxpayers, and the unfunded liabilities that exist today will continue to inhibit plan assets from compounding over decades, making paying down the $36 billion debt and honoring the state’s long-term obligations more di­fficult.

Author(s): Vittorio Nastasi

Publication Date: 4 February 2021

Publication Site: Reason

Georgia’s $90 billion teacher pension system has seen big COVID recovery



Next year’s state budget proposal includes an extra $66 million for Georgia’s massive teacher and university pension system to keep it on solid financial footing.

But after not meeting its assumed rate of investment return in fiscal 2020 — which ended June 30 — the more than $90 billion Teachers Retirement System has made a strong recovery during the COVID-19 pandemic, as did the investment markets it relies on to make sure it can pay pensions to 137,000 former educators.

A similar program that provides pensions to 50,000 state employees — the Employees Retirement System — saw a similar bounce back.

Buster Evans, executive director of the TRS and a former school superintendent, told a legislative retirement committee Tuesday that the teacher system saw a return on investments in 2020 of about 15%, which is pretty close to the return for the S&P 500-stock index.

“We are glad we had a V-shaped recovery,” Evans said.

That’s good news for a system relied on by more than 400,000 former and current educators to provide retirement benefits.

The system has had its ups and downs in recent years, with the state having to make huge contributions at times to keep the books in good shape. Those taxpayer contributions have prompted Republican lawmakers to raise the possibility of making changes to the pension programs, something teacher groups have fought off.

When the markets plummeted at the beginning of the pandemic, the system’s assets lost billions of dollars in value.

“There was a sick feeling in my stomach,” Evans told the TRS board last year.

But the TRS has ridden the wave of market gains since then.

Author: James Salzer

Publication Date: 3 February 2021

Publication Site: Atlanta Journal-Constitution

Public Pension Plans’ Funded Ratios Have Been Declining for Years


Over time, changes in a pension plan’s funded ratio, also referred to as a pension’s funded status, can show the rate at which the plan’s debt is growing.

In 2001, West Virginia was the only state where public pension plans had an aggregate funded ratio of less than 60 percent. However, 18 years later, in 2019, nine states faced aggregate funded ratios below 60 percent.

In that same time period, the number of states with funded ratios below 70 percent (but above 60 percent) grew from three to 14. Together, these numbers show that, as of 2019, 23 states had less than 70 percent of the assets on hand that they need to be able to pay for promised future retirement benefits.


Author: Jordan Campbell

Publication Date: 29 January 2021

Publication Site: Reason